Treadway tells generators how to find 4,000-6,000 more mw

ERCOT could get up to 4,000-6,000 mw of demand response with the right rules, Nat Treadway told a Gulf Coast Power Assn conference.

          He's managing partner at Distributed Energy Financial Group.

          ERCOT has about 1,800 mw of demand resources now in its "load acting as a resource" (LAAR) program.

          How can Texas triple that number?

          The state's retail choice law prevents delivery utilities from offering competitive services such as demand response.

          Thus most demand response-related tariffs such as time-of-day and real-time pricing pilots, interruptible service and direct load control aren't available.

          What should regulators do?

          Let the market work, Treadway urged.

          Regulators and central planners have a poor history of predicting what Texas customers want, Treadway said.

          Many experts a decade ago were convinced that most Texans would never support green power or energy efficiency policies, he reminded.

          Yet polls in 1996-98 found that two-thirds of the customers supported green and conservation programs -- driving Texas' retail choice law and setting the stage for Texas' wind power lead.

          Thus Treadway urged Texas leaders to trust the market.

          It will determine what demand solutions customers want most.

          Leaders need to understand that there's not a single type of demand response customer or one program that will fit everyone's need, he added.

          A strong, competitive generation market includes diverse fuel sources and types of plants, he noted.

          A robust demand market needs diversity as well -- from curtailment, load shifting, storage, flexible use, critical peak pricing and time-of-day response.

          Many small customers won't ever participate in demand response, Treadway stressed.

          That's OK as long as they are appropriately charged for getting the convenience, comfort and simplicity of firm service.

          He would keep chipping away at average costs.

          Declining reserve margins (RT, 9/19, 6/2) aren't a new phenomenon in ERCOT, Treadway observed.

          Reserve margins fell in the mid-1980s as expected nuclear additions were delayed and again fell in the mid -1990s.

          Of course, reserve margins skyrocketed at the turn of the century-- nearing 40% -- in response to wholesale market reforms and getting ready for competition.

          Markets respond "faster and more ruthlessly" than regulators, Treadway concluded.

          The wholesale market is more volatile now, he added, and risks need to be mitigated.

          Demand response "brings value and flexibility needed in a well-functioning, two-sided market," Treadway argued.

          Advanced metering can be a "transformational technology," he claimed.

          Smart meters could facilitate dispatchable DG, remote energy management, measurement and verification while giving customers more information on how they use power.

          More price information at different times for different periods will give customers and marketers the ability to respond, he added.

          Some demand response opportunities aren't compensated in ERCOT, he noted, pointing to tiered frequency response and voluntary price response.